Distortions and Anomalies: Can Evolutionary Theory Bring Order to Human Decision-Making?

Abstract.  By almost any measure, Homo sapiens is a spectacularly successful species. From humble origins approximately two million years ago, humans have grown to a population that exceeds seven billion and have colonized – and come to dominate – nearly every terrestrial biome. This phenomenal growth suggests that, on average, our ancestors made very good decisions. Yet an avalanche work from psychology and economics suggests that the decision-making software that our brains run seems to be profoundly flawed — that we are, in a word, irrational. How can we reconcile this paradox? 

Humans are biological entities and, as such, we are subject to the laws of evolution. However, when the rules for rational decision-making were formalized, this fact was ignored. It turns out that the rules for a living organism, anchored in the present and subject to a force of selection which is extremely averse to extinction, are quite different from the rules of abstract, formal rationality. I will show how the all-important need to avoid extinction in a world that is at best incompletely known has profound implications for preferences, utility, and rationality. By ignoring the condition of existential uncertainty, the theory of rational decision-making has developed distorted expectations of how an organism working in its own best interest should behave. I will discuss some of the classic distortions from the rational choice paradigm revealed by behavioral economics and show how thinking about the way that selection shaped human decision-making has the potential to both explicate and unify otherwise disparate anomalies.